The biggest deal in former Goldman trader Xavier Rolet’s career is dead, and so are his plans for imminent retirement.
While Rolet, chief executive officer of the London Stock Exchange Group Plc, has pulled off a string of successful deals, his quest to create a European champion exchange operator was a step too far for regulators. The European Commission on Wednesday dealt a final blow to Deutsche Boerse AG’s $14 billion attempted takeover of LSE, saying it would have created a “de facto monopoly.”
Rolet, 57, said this month he’d stay on at the exchange if the deal collapsed. He’s extending a career that started in the 1980s at Goldman Sachs Group Inc., eventually leading to the LSE’s top job in May 2009.
His profile has been boosted by the ambition to link together flagship stock markets in London and Frankfurt with combined market capitalization of some $30 billion, while LSE shares have rallied nearly five-fold during his time as chief.
“He already had a high profile, but more amongst the City,” said Niki Beattie, a Merrill Lynch alumna who now heads adviser Market Structure Partners. “Now, he has more of a political profile.”
An LSE spokesman declined to comment, beyond a statement on Wednesday that said the company is confident in its prospects as a standalone business.
Brexit helped raise his standing in political circles. The Frenchman has played a key role as government negotiations unfolded by defending part of the U.K.’s financial industry, especially euro derivatives clearing, from European officials keen to take it away as the U.K. prepares to leave the European Union.
The Deutsche Boerse deal was torqued by the politics that are also pulling the EU apart. And while he and Deutsche Boerse executives said their combination made sense regardless of Britain’s EU membership, the June vote made the prospect of having a pillar of German finance headquartered in London too much for Frankfurt officials.
Despite the setback, Rolet has been a successful acquirer for LSE — in 2014, he bought an index business for what amounted to approximately $1.9 billion, ramping up the company’s scale in passive investing. Before that, LSE became the majority owner of LCH.Clearnet Ltd., giving the company a lucrative clearinghouse that’s the envy of other European countries.
Rolet has bounced back before from deals that died. The company scrapped its bid for Toronto’s exchange — TMX Group Inc. — after it failed to win shareholder support.
Rolet has profited handsomely. He owned about about 17.5 million pounds ($21.8 million) worth of shares outright as of December, according to the company’s annual report. Rolet also has more than 300,000 shares that are unvested, or subject to outstanding time or performance conditions. He’s also in line to receive a 2.4 million pound performance award this year.
The company’s board said it still has faith in Rolet and his management team.
A top question is whether LSE and Deutsche Boerse will train their sights on a new acquisition. The companies have long sought to create a European champion that can counter heavyweights in the U.S., and these days they also have to contend with growing titans in Asia. However, as Javier Hernani, chief financial officer of Spain’s stock exchange company, recently pointed out, much of the industry in Europe has already consolidated.
Still, a deal with another rival could be in the cards, says Fidessa Group Plc.’s Steve Grob.
“They’re going to try to find another merger opportunity — there’s two, possibly three, suitors left,” said Grob, global director of group strategy at Fidessa. Those suitors are likely Intercontinental Exchange Inc., CME Group Inc. and Hong Kong Exchanges & Clearing Limited. “With all the politicization that has come, and with the Brexit agenda, I think it’s going to be hard.”
Atlanta-based ICE considered a bid for LSE last year but dropped it amid sharp criticism from Rolet.
The Anglo-German tie-up would potentially have been the most profitable company in its industry, spanning more than 30 countries. It would have also tied the London exchange company to a thriving futures exchange. Former LSE CEO Clara Furse failed in 2001 to buy Liffe, the U.K. derivatives exchange that eventually ended up in the hands of ICE.
“The biggest mistake she made was not buying Liffe,” said Thomas Caldwell, CEO of Caldwell Securities Ltd., a money management firm in Toronto. “That would have made London the crown jewel.”
Rolet bulked up in interest-rate derivatives with its majority ownership of the world’s biggest swaps clearinghouse. But a combination with Deutsche Boerse’s Eurex would have created an unmatched powerhouse in the region. It may also have created a bridge between financial centers London and Frankfurt, at a time when politics are creating barriers between them.
“The prohibition is a setback for Europe,” Joachim Faber, chairman of the Supervisory Board of Deutsche Boerse, said in a statement. “A rare opportunity to create a global market infrastructure provider based in Europe and to strengthen the global competitiveness of Europe’s financial markets has been missed.”
London Stock Exchange CEO Watches His Biggest Merger Bet Die – Bloomberg